The newly formed Dutch coalition government announced its plans for pension reform aimed at a collective transition to a defined contribution system, in a paper outlining the coalition's political platform for 2017 to 2021.
A deal was struck Tuesday to form a four-party coalition government following parliamentary elections in March.
The new DC plan design resembles the defined contribution framework introduced by the Netherlands in 2016, but which currently applies to new plan participants only. The reform is set to change that by transferring the assets and liabilities of all defined benefit funds to defined contribution plans, the paper said.
The Dutch government on Tuesday published requirements for the new retirement plan design for the transferred pension funds, addressing risks associated with accrual and payout phases. The reform will make the Dutch system less vulnerable to interest rate moves and will make solvency buffers redundant. The plan also supports a transition to personal accounts in the accrual phase, which upon participants' retirement will be moved into collective pools.
As a result of the reform, which is expected to be implemented by 2020, all defined benefit funds will become defined contribution plans subject to agreement with the plans' social partners, such as unions, workers and corporations.
The Cabinet expects an agreement with the social partners will be reached in early 2018. The government added in the paper that it will provide support using tax instruments to ensure a smooth and evenly distributed transition for all age cohorts and participants.
The pension reform plan was unexpectedly included in the paper. "The expectation was that this part might have been left out as there is no compromise reached yet in the industry, among the social partners," said Jacqueline Lommen, senior defined contribution pensions strategist at State Street Global Advisors, in an email.